Question

In order to reduce the risk associated with a new line of business, Conservative Corporation established Spin Company as a wholly owned subsidiary. It transferred assets and accounts payable to Spin in exchange for its common stock. Spin recorded the following entry when the transaction occurred:

Cash and receivables 23,000
Inventory 15,000
Land 30,000
Buildings 100,000
Equipment 95,000
Accounts Payable 20,000
Accum Depr—Buildings 32,000
Accum Depr—Equip 30,000
Common Stock 56,000
Additional Paid-In Capital 125,000

Based on the preceding information, what amount did Conservative report as its investment in Spin after the transfer of assets and liabilities?
A) $181,000
B) $221,000
C) $263,000
D) $243,000

Answer 1

The investment in Spin after the transfer of assets and liabilities is $526,000.

Step-by-step explanation:

The amount that Conservative Corporation reported as its investment in Spin after the transfer of assets and liabilities is:

Cash and receivables: $23,000

Inventory: $15,000

Land: $30,000

Buildings: $100,000

Equipment: $95,000

Accounts Payable: $20,000

Accum Depr—Buildings: $32,000

Accum Depr—Equip: $30,000

Common Stock: $56,000

Additional Paid-In Capital: $125,000

Adding all these amounts, the investment in Spin after the transfer of assets and liabilities is:

$23,000 + $15,000 + $30,000 + $100,000 + $95,000 + $20,000 + $32,000 + $30,000 + $56,000 + $125,000 = $526,000